US-China Commission Report - Fatal System Error

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The implementation by the Chinese government of the two agreements
appears to have been half-hearted at best and directly obstructive
at worst. With U.S. investigation of alleged prison labor
cases in China entirely reliant upon Chinese official cooperation,
ICE officials have no recourse but to let alleged cases grow cold
while they await Chinese actions or permission from Chinese officials
to proceed with steps set forth in the agreements.
A Case Study of Alleged Chinese Prison Labor Imports
The Case of Marck & Associates, Inc. v. Photo USA Corporation
In an effort to provide a case study of the alleged import into the
United States of Chinese prison-manufactured products and their
impact on U.S. businesses, the Commission received testimony and
conducted research this year related to certain aspects of an ongoing
legal dispute between Gary Marck, president of Marck & Associates,
Inc., based in Toledo, Ohio, and James Peng, president of
Photo USA Corporation, based in Sunnyvale, California. This Commission
takes no position on the ongoing litigation between Mr.
Marck and Mr. Peng, makes no judgment regarding the veracity of
particular claims by either side, and does not seek to influence the
outcome of this litigation in any way. The Commission’s sole interest
in this case lies in its public policy implications.
Marck & Associates, Inc., and Photo USA Corporation are competitors
in the market for drinkware products such as ceramic coffee
mugs. Mr. Marck filed a lawsuit against Mr. Peng in the Federal
District Court for the Northern District of Ohio alleging,
among other unfair business practices, that Mr. Peng was acting
as a wholesaler and distributor of coffee mugs made with prison
labor in China. The judgment of the court was that Mr. Marck
failed to meet the evidentiary burden to establish that Mr. Peng’s
products were produced by prison labor, but the court issued a
judgment against Mr. Peng pertaining to other unfair business
practices. This case is currently on appeal. 53
The issue in this case pertaining to prison labor is Mr. Marck’s
assertion that the Shandong Zibo Maolong Ceramic Factory (hereafter
‘‘Maolong’’) is a front company for the Luzhong Prison, located
in Shandong Province in northeastern China. According to The
Laogai Research Foundation, the Luzhong Prison is a ‘‘reeducation
through labor’’ facility that operates a large ceramics factory producing,
along with other products, approximately 70 million ceramic
pieces each year. 54 An analysis performed by Mr. Marck’s
representatives suggests that this factory produces over 50 percent
of the ceramic products imported each year into the United
States. 55 Mr. Marck presented to the Commission both eyewitness
testimony and photographic evidence that the Maolong facility is
located in close proximity to the Luzhong Prison; that the single
kiln within the Maolong facility is of insufficient capacity to
produce the volume of products marketed by Maolong each year;
and that it is, in fact, an inoperative showcase kiln intended to
help perpetuate the fiction that Maolong manufactures its own
products. 56